-11-

In support of the Coronavirus, Aid, Relief, and Economic Security Act (the “CARES Act”), the Bank had processed nearly 350 applications for PPP loans of approximately $170,000,000 to provide much-needed cash to small business and self-employed taxpayers during the COVID-19 crisis. The loans were primarily made to existing bank customers and are 100% guaranteed by the Small Business Administration and no allowance for loan loss was recorded for these loans.

The following table presents the aging of loans by loan categories at September 30, 2020 and December 31, 2019:

	Performing						Nonperforming
(In thousands)	Current		30-59 Days		60-89 Days		90 Days and Over		Non- accrual		Total Loans
September 30, 2020
Commercial and industrial	$	301,886	$	—	$	—	$	—	$	—	$	301,886
PPP		172,211		—		—		—		—		172,211
Real estate:
Commercial:
Mortgage		94,792		—		—		—		—		94,792
Construction		23,795		—		—		—		—		23,795
Faith-based:
Mortgage		331,419		—		—		—		—		331,419
Construction		20,452		—		—		—		—		20,452
Other		2		—		—		—		—		2
Total	$	944,557	$	—	$	—	$	—	$	—	$	944,557
December 31, 2019
Commercial and industrial	$	323,857	$	—	$	—	$	—	$	—	$	323,857
Real estate:
Commercial:
Mortgage		101,654		—		—		—		—		101,654
Construction		25,299		—		—		—		—		25,299
Faith-based:
Mortgage		305,826		—		—		—		—		305,826
Construction		15,945		—		—		—		—		15,945
Other		57		—		—		—		—		57
Total	$	772,638	$	—	$	—	$	—	$	—	$	772,638

The following table presents the credit exposure of the loan portfolio by internally assigned credit grade as of September 30, 2020 and December 31, 2019:

(In thousands)	Loans Subject to Normal Monitoring¹		Performing Loans Subject to Special Monitoring²		Nonperforming Loans Subject to Special Monitoring²		Total Loans
September 30, 2020
Commercial and industrial	$	288,060	$	13,826	$	—	$	301,886
PPP		172,211		—		—		172,211
Real estate:
Commercial:
Mortgage		93,370		1,422		—		94,792
Construction		23,795		—		—		23,795
Faith-based:
Mortgage		328,285		3,134		—		331,419
Construction		20,452		—		—		20,452
Other		2		—		—		2
Total	$	926,175	$	18,382	$	—	$	944,557
December 31, 2019
Commercial and industrial	$	321,554	$	2,303	$	—	$	323,857
Real estate:
Commercial:
Mortgage		100,346		1,308		—		101,654
Construction		25,299		—		—		25,299
Faith-based:
Mortgage		304,513		1,313		—		305,826
Construction		15,945		—		—		15,945
Other		57		—		—		57
Total	$	767,714	$	4,924	$	—	$	772,638

¹ Loans subject to normal monitoring involve borrowers of acceptable-to-strong credit quality and risk, who have the apparent ability to satisfy their loan obligations.

² Loans subject to special monitoring possess some credit deficiency or potential weakness which requires a high level of management attention.

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A loan is considered impaired when it is probable that a creditor will be unable to collect all amounts due, both principal and interest, according to the contractual terms of the loan agreement. When measuring impairment, the expected future cash flows of an impaired loan are discounted at the loan's effective interest rate. Alternatively, impairment could be measured by reference to an observable market price, if one exists, or the fair value of the collateral for a collateral-dependent loan. Regardless of the historical measurement method used, the Company measures impairment based on the fair value of the collateral when the Company determines foreclosure is probable. Additionally, impairment of a restructured loan is measured by discounting the total expected future cash flows at the loan's effective rate of interest as stated in the original loan agreement. To measure impairment at September 30, 2020, the optional use of the practical expedient to use the fair value of collateral was utilized. The Company uses its nonaccrual methods as discussed in greater detail in the Company’s 2019 Annual Report on Form 10-K.

Impaired loans consist primarily of nonaccrual loans, loans greater than 90 days past due and still accruing interest and troubled debt restructurings, both performing and nonperforming. Troubled debt restructuring involves the granting of a concession to a borrower experiencing financial difficulty resulting in the modification of terms of the loan, such as changes in payment schedule or interest rate. Management measures impairment in accordance with FASB ASC 310, Allowance for Credit Losses. The fair value of the collateral is based upon an observable market price or current appraised value and therefore, the Company classifies these assets as nonrecurring Level 3. There were no non-accrual loans or loans delinquent 90 days or more and still accruing interest at September 30, 2020 or December 31, 2019. There were two loans classified as troubled debt restructurings totaling $10,320,000 and one loan that was considered impaired totaling $2,500,000 at September 30, 2020 and none at December 31, 2019. There were no foreclosed loans recorded as other real estate owned (included in other assets) as of September 30, 2020 or December 31, 2019.

The following table presents the recorded investment and unpaid principal balance for impaired loans at September 30, 2020. There were no impaired loans at December 31, 2019 or September 30, 2019.

(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance for Loan Losses
Commercial and industrial:	$	11,782	$	11,782	$	500
Real estate:
Faith-based:
Mortgage		1,038		1,038		—
Total impaired loans	$	12,820	$	12,820	$	500

A summary of the activity in the allowance for loan losses from December 31, 2019 to September 30, 2020 is as follows:

(In thousands)	December 31, 2019		Charge- Offs		Recoveries		Provision		September 30, 2020
Commercial and industrial	$	4,874	$	—	$	16	$	211	$	5,101
Real estate:
Commercial:
Mortgage		1,528		—		—		(34)		1,494
Construction		191		—		—		(2)		189
Faith-based:
Mortgage		3,842		—		1		510		4,353
Construction		121		—		—		40		161
Total	$	10,556	$	—	$	17	$	725	$	11,298

A summary of the activity in the allowance for loan losses from December 31, 2018 to September 30, 2019 is as follows:

(In thousands)	December 31, 2018		Charge- Offs		Recoveries		Provision		September 30, 2019
Commercial and industrial	$	4,179	$	—	$	34	$	672	$	4,885
Real estate:
Commercial:
Mortgage		1,417		—		—		(161)		1,256
Construction		89		—		—		91		180
Faith-based:
Mortgage		3,961		—		—		32		3,993
Construction		155		—		—		(38)		117
Other		424		—		—		(346)		78
Total	$	10,225	$	—	$	34	$	250	$	10,509